A Test of IPO Theories Using Reverse Mergers

Asquith, Paul; Rock, Kevin Francis

doi:10.2139/ssrn.1737742

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A Test of IPO Theories Using Reverse Mergers

34 Pages Posted: 11 Jan 2011 Last revised: 14 Nov 2011

See all articles by Paul Asquith

Paul Asquith

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA); National Bureau of Economic Research (NBER)

Kevin Francis Rock

affiliation not provided to SSRN

Date Written: October 28, 2011

Abstract

Reverse mergers are an alternative method to IPOs for going public and announcement day price reaction to reverse mergers is comparable to the initial day price reaction to IPOs. Most of the academic theories developed thus far to explain the market’s reaction to IPOs, however, are not applicable to reverse mergers. Using reverse mergers as an out-of-sample test on these IPO theories suggests most of them are invalid.

Keywords: IPO, Reverse Mergers

JEL Classification: G30, G32, G34

Suggested Citation: Suggested Citation

Asquith, Paul and Rock, Kevin Francis, A Test of IPO Theories Using Reverse Mergers (October 28, 2011). Available at SSRN: https://ssrn.com/abstract=1737742 or http://dx.doi.org/10.2139/ssrn.1737742